Monday, January 23, 2012

A Question about Bank Accounts*

Something I forget to comment on in the recent post about some of the measures introduced by Mariano Rajoy: it will also become illegal to pay for a transaction worth more than €1000 in cash.

Modern governments hate cash, and probably have done since the dropping of the gold standard. Ideologues hate cash because they fear people may be purchasing unapproved items. Governments fear that they may be losing opportunities to take a bit of tax. Since they have noticed that the need for a physical medium of exchange has been greatly reduced by modern technology they have been looking for ways to limit its use as much as possible. Money cables, credit cards, bank accounts, the interwebs, etc have made trade at all levels a simpler, quicker, more liquid process, and we are all better off for it. But it leaves a trail. That trail should exist for the convenience of the parties involved in the transaction of course, but its existence is a too tempting for the powers that be to ignore. It is the easiest thing in the world to invoke the spectre of drug cartels and Chinese Mafiosi and demand that the trail be preserved for the convenience of the government.

For a couple of years it has been impossible (over here) to have a mobile phone unless it’s linked to an identified bank account. None of that picking one up at the supermarket with a €50 card already in it. You have to go through a tedious amount of paperwork and give out a lot of personal information before the company is allowed to sell you the product you want.

For rather longer it has been impossible to pay in any large sum to your bank account without having to identify yourself and having your details taken. Now it is illegal to pay cash for anything more expensive than medium-sized television.

It won’t work. There are plenty of ways around it, the simplest of which is just to ignore it completely. For decades companies have traditionally worked a kind of double accounting system with their employees’ salaries, industries with anything involving VAT, property registrars with the values of houses, and so on (err, so I hear). The government knows this very well, and they have always been complicit up to a point, and taken it all into account. It would collapse the economy if they suddenly tried to claim all of the tax that the law says is due.

So this new restriction is just a bit of a nuisance, really. It shouldn’t matter very much. Two points, however:a) It shows the way the new government is thinking- exactly like the old one, but with more freshness and energy (no surprise there),*b) If the government is going to effectively force everyone to have bank accounts, is there not a case for them supporting banks that should have gone bankrupt, on the grounds that some banks at least must continue to exist?

The answer is almost certainly no, but I can see them using that line to justify something, somewhere, in the future.